Letshego's grand strategy takes shape
The issuance of a provisional banking licence to one of Letshego Holdings’ subsidiaries is a boost to the group’s strategy of becoming a truly Pan African financial services company.
Letshego Namibia has been granted a temporary banking licence by the country’s central bank which is subject to ‘fulfillment of certain conditions within six months’. In a statement issued late on Wednesday, the Botswana Stock Exchange(BSE) listed company said the provisional licence will further allow the group to broaden its range of products and services. This among others includes deposit taking, diversifying into micro-finance lending and enhancing unsecured consumer offering.
“The issue of this provisional licence is a key milestone in its transformational journey and will enable the Group to meet its commitment to improving lives and financial inclusion in Namibia,” said the company, which was formed in Gaborone more than ten years ago. Going forward, Letshego aims to become a deposit taking financial institution in a number of markets and expand into geographies with high growth prospects.
“In particular, it will seek opportunities for further diversification of the business where there are financial inclusion requirements and a need for productive lending,” said the statement. Letshego, which operates in ten companies, recently announced it has terminated negotiations with an unnamed third party in the East African region. The company’s application has been turned down by Bank of Botswana(BoB) for undisclosed reasons.BG Business was not able to establish if the micro-lending titan has re-submitted its application by close of business on Wednesday. If they approved to trade as a bank, the micro-lending will be the country’s first home grown bank.
Meanwhile, in the past financial year to January 2014, Letshego generated 58 percent of its profits before tax from its external operations(excluding Botswana) writing in the latest annual report, Managing director Chris Louw said. “This growth is in line with our stated objective of diversifying geographically,” he said. Botswana still continues to be the biggest contributor to the group results with its contribution to total profits at 42 percent, followed by Namibia with 21 percent and Mozambique with 19 percent contribution to profit. The group’s South Sudan and Rwanda operations have the lowest contribution both contributing less than five percent to revenue.
Louw, who replaced Jan Classen last year, stated that the group’s profit after tax growth was flat year on year and only increased by one percent in the current year to record P850 million. The profit resulted from combined results of the pressure on margins, strategic investments in technology and group expansion initiatives. The group remains well capitalised and has cash resources of over P300 million available to grow the business further. During the current financial period, P350 million was raised from the maiden issue of Letshego’s BSE listed medium term note programme. With the excess capital that the company is holding in their balance sheet as a short to medium term target, the group is looking to increase its debt levels. “The group’s solid capital base provided it with a significant buffer to absorb any negative effects of change in the business environments it currently operates in.”
On their subsidiaries on December last year the company sold all their shareholdings in Letshego Zambia and fully disinvested from the subsidiary. Earnings per share are lower due to the conversion of a loan to equity in the financial year, which is a non-recurrent phenomenon. Letshego boasts of a market capitalisation of P4,9 billion.
